Question

1: the advantages of proprietary companies use Crowd-sourced funding (CSF) ?

2: the disadvantages of proprietary companies use Crowd-sourced funding (CSF) ?

Answer 1

Crowd Funding :

Crowdfunding is a way through which many proprietary businesses are raising money by inviting large group of people to pledge or invest small amounts, usually online. It is one way of the way of sourcing the finance and it doesn’t involve traditional banks. Generally businesses advertise their project on a crowdfunding website and potential investors choose whether to pledge money, how much, and the return they expect.

Advantages of crowd funding:

1. Usually businesses set a target amount that they want to raise for their project and if the project becomes a hit then can easily source each penny for the project through crowd funding.
2. A successfully crowdfunded projects can get huge amounts of attention in social media and trough other platforms. It will help them to raise the money beyond required for the project and which can be very difficult to achieve on its own.
3. Through crowdfunding a company will not only raise the money on the other hand it will become a good way of marketing the project among the public.
4. In the crowdfunding process the business can get feedback about their idea of project and how to improve it from the public and the investors intended to put their money.
5. Crowdfunding is very recommended for niche ideas that wouldn’t have access to a receptive audience or funds. It will help them to reach large group of public.
6. Under the process of crowdfunding a business’s audience becomes its most loyal customers. As they invest their own money into the project.

Disadvantages of crowd funding:

1. Crowdfundable projects must be visible, finite, understandable and not vague. Otherwise your project will not able to attract investors and ultimately it will end up as a failed experiment.
2. If the target amount isn’t received the company will drop the idea of the project and potential investors will get their money back. Therefore, the business will goes away empty handed.
3. Failed projects will cause risk of damage to the reputation of the business and people who have pledged money to them will start having trust issues on the capabilities of the company.
4. A lot of background work is required before businesses start to raise money through crowd funding. It will take a lot of time to reach to community and put their project idea to attract the investors.
5. A strong and established existing network is very important for the success of a project. Without it, even the best ideas don’t get backing as it leads to lack of awareness among the people. A company which is having a limited network, no digital or social media presence, or having a very complicated product will find it difficult to crowdfund and attract more investors.
6. A structural forecasted plan is very important for the business. Otherwise the company will give away too much of the business to investors in the process of crowdfunding.